NEW YORK: Oil prices rose on Tuesday, reversing overnight losses as better-than-expected U.S. manufacturing activity data spurred hope for a post-pandemic economic recovery, and as analysts forecast a sixth weekly drawdown in U.S. crude inventories.
The dollar was at it lowest in more than two years against a basket of currencies, pressured by the U.S. Federal Reserve’s loosening of inflation policy last week, which was supportive for oil as dollar-priced commodities become cheaper for global buyers.
Brent crude futures gained 89 cents, or nearly 2%, to $46.17 a barrel by 10:47 a.m. EDT (1447 GMT), while U.S. West Texas Intermediate (WTI) crude futures rose 74 cents, to $43.35 a barrel.
“Everyone is looking for a draw, of one degree or another, in the API this afternoon,” said Bob Yawger, director of energy futures at Mizuho in New York. “The manufacturing numbers and the bullishness around the AstraZeneca virus vaccine added to the optimism,” he said.
U.S. crude stocks were forecast to have fallen by about 2 million barrels last week, according to analysts in a Reuters poll ahead of weekly data from the American Petroleum Institute at 4:30 p.m. ET (2030 GMT) and the government on Wednesday.
Gasoline inventories were expected to have fallen by 3.6 million barrels.
U.S. manufacturing activity accelerated to a more than 1-1/2-year high in August amid a surge in new orders, but employment continued to lag, supporting views that the labor market recovery was losing momentum.
The Institute for Supply Management (ISM) said its index of national factory activity increased to a reading of 56.0 last month from 54.2 in July. That was the highest level since January 2019 and marked three straight months of growth.
AstraZeneca has expanded its previous agreement with Oxford Biomedica to mass-produce the British drugmaker’s COVID-19 vaccine candidate, as it looks to scale-up supply ahead of a possible fast-track approval from the United States.
Strong Chinese manufacturing data also lifted oil prices, said Jeffrey Halley, a senior market analyst at OANDA.
The Caixin/Markit Manufacturing Purchasing Managers’ Index(PMI) showed China’s factory activity expanded at the fastest pace in nearly a decade last month, bolstered by the first increase in new export orders this year.
Bulls also pushed up equities, with the MSCI world equity index close to a record peak on Tuesday.
Yet oil, which often moves in tandem with equities, remains reined in by demand concerns.
PVM analyst Tamas Varga said oil prices are likely to move below recent levels, citing sizeable downward revisions to second-half demand estimates by the International Energy Agency and the Organization of the Petroleum Exporting Countries (OPEC).
In a Reuters poll of 43 analysts and economists, global oil demand was seen contracting by between 8-10 million barrels per day (bpd) versus July’s 7.2-8.5 million bpd consensus.
Brent was forecast to average $42.75 a barrel in 2020, up from July’s $41.50 consensus and compared with an average price of $42.60 so far this year. Brent is expected to average $50.45 in 2021.
The 2020 U.S. crude price outlook rose to $38.82 a barrel from July’s $37.51.
(Additional reporting by Sonali Paul and Seng Li Peng in Singapore and Shadia Nasralla in London; Editing by Marguerita Choy and Louise Heavens)
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